PROJECT REPORT ON PORTFOLIO MANAGEMENT IN BANKING Bachelor of Commerce (Banking and Insurance) Semester V 2012-2013 In Partial Fulfillment of the

recruitment Bachelor of Banking & Insurance SUBMITTED By VARSHA .R. Shetty (ROLL NO: 8)

S.M.SHETTY COLLEGE OF SCIENCE, COMMERCE & MANAGEMENT STUDIES OPP. JALVAYU VIHAR, HIRANANDANI GARDEN, POWAI Mumbai400076

CERTIFICATE

DATE :PLACE : -

THIS IS TO CERTIFY THAT M/s VARSHA .R. SHETTYOF B.COM BANKING AND INSURANCE, SEMESTER V (2012-2013) HAS SUCCESSFULLY COMPLETED THE PROJECT ON PORTFOLIO MANAGEMENT IN BANKING UNDER THE GUIDANCE OF PROF. SURAJ AGRAWAL.

PROJECT GUIDE:

PRINCIPAL:

COURSE CO-ORDINATOR:

INTERNAL EXAMINER:

EXTERNAL EXAMINER:

DECLARATION

DATE:-

I THE UNDERSIGNED SURAJ AGARWALA HAVE GUIDED VARSHA .R. SHETT FOR HIS PROJECT. HE HAS COMPLETED THE PROJECT PORTFOLIO MANAGEMENT IN BANKING SUCCESSFULLY. I HEREBY DECLARE THAT THE INFORMATION PROVIDED IN THIS PROJECT IS TRUE AS PER THE BEST OF MY KNOWLEDGE. THANKING YOU.

YOURS FAITHFULLY PROF. SURAJ AGARWALA.

DECLARATION

I, VARSHA .R. SHETTY THE STUDENT OF T.Y.BCOM (BANKING & INSURANCE) SEMESTER V (2012-13) HEREBY DECLARE THAT THIS PROJECT TITLED PORTFOLIO OF MANAGEMENT IN BANKING SUBMITTED BY ME ON ACTUAL WORK CARRIED OUT BY ME UNDER THE GUIDANCE AND SUPERVISION OF PROFESSOR.SURAJ AGARWAL. ANY REFERENNCE TO WORK DONE BY ANY OTHER PERSON OR INSTITUITION OR ANY MATERIAL. IT IS FURTHER TO STATE THAT IT IS NOT SUBMITTED ANYWHERE ELSE OR ANY EXAMINATION

Signature VARSHA .R. SHETTY Roll no 08.

ACKNOWLEDGMENT

I wish to express my gratitude for giving us an opportunity to be a part of their esteem organizations and enhance our knowledge by granting permission under their kind guidance. I am thankful to our teachers, our guide, for his valuable guidance and cooperation during the course of the program. He provided us with support whenever needed has been instrumental in completion of this program. I am also sincerely thankful to my faculty guide, Mr. SURAJ AGARWAL, who had an suggest me his valuable suggestions. His guidance and encouragement has showed fulfillment to my project

Thanking You
VARSHA .R. SHETTY .

INDEX SR NO. 1 2 3 4 5 6 7 8 9 10 TOPIC INTRODUCTION OF PORTFOLIO MANAGEMENT BASIC PRINCIPLES ICICI BANK ECONOMIC TIMES HSBC BANKS OF ILLINIOS RBI SCHEMES LOANS BENEFITS PAGE NO.

INTRODUCTION
Portfolio management means selection of securities and constant shifting of the portfolio in the light of varying attractiveness of the constituents of the portfolio. It is the basis of all scientific portfolio management. The expected return on portfolio is directly related to the expected returns on component securities, it is not possible to deduce a portfolio riskness simply by knowing the riskness of individual securities. Portfolio management includes portfolio planning, selection and construction, review and evaluation of securities. The skill in portfolio management lies in achieving a sound balance between the objectives of safety, liquidity and profitability. Investors should sell at market tops and buy at market bottoms. Timing is a crucial factor while switching between shares and bonds.

PORTFOLIO MANAGEMENT A portfolio management is a collection of investment held by an institution or a private individual. Holding a portfolio is a part of investment and risk limiting strategy called diversification. The aim of portfolio management is to achieve the maximum return of portfolio which has been delegated to be managed by an individual manager or financial institution. The manager has to balance the parameters which define a good investment i.e. security, liquidity and return. While doing a portfolio management to a customer it is ensured that the portfolio has objectives and achieves a sound balance between the completing objectives, which are:

Safety of investment Stable current return Appreciation in capital value Liquidity Tax planning Minimizing the risk Diversification

THE ADVANTAGES OF USING PORTFOLIO MANAGEMENT

Investing in the stock market can be a thrilling, and lucrative, way to learn about the market forces that make our financial world turn. It can also be dangerous without educating yourself first. The fortunes of companies are always in flux, and a big, bad bet on one of these firms can clean out your finances. To mitigate risk and realize higher returns, many investors choose to invest in stock portfolios and take advantage of the expertise that comes with portfolio management. Identification A stock portfolio is a package of stocks in which a person's money is invested. The composition of a stock portfolio can frequently change as an investor buys more shares in a stock already in the portfolio or sells stocks in the portfolio and buys new ones. Stock portfolios are often geared toward a theme that reflects investment style and market opportunities. For instance, some portfolios may only invest in blue-chip companies. Others may invest in emerging markets or a specific industry such as telecommunications. Still other portfolios are geared toward a specific investing style, such as a high-risk, highreturn portfolio or a long-term, conservative growth portfolio.

Diversification One of the main benefits of creating and managing a portfolio is the ability to diversify your holdings. When you invest all of your money in a single stock, your fortunes are tied to the ups and downs of that stock's price. If the company in which you invested falls on hard times, so do you. By investing in a portfolio, you spread the risk across an array of stocks, allowing you a better chance of making money in the long term, even if some of your stocks do poorly.

Expertise Even if you manage your own portfolio, a smart portfolio requires that you research an array of companies and industries. Knowing the market and your prospects in it leads to smarter investing. Many investors also employ the services of banks or investment firms to help manage their portfolios. Official portfolio managers are often financial professionals with decades of experience, reams of data at their disposal and a team of other experts. This knowledge, along with the diversification of a portfolio, leads to better investment decisions and often to better returns.

Investment Objectives and Constraints

Investing is a wide spread practice and many have made their fortunes in the process. The starting point in this process is to determine the characteristics of the various investments and then matching them with the individuals need and preference. All personal investing is designed in order to achieve certain objectives. These objectives may be tangible such as buying a car, house etc. And intangible objectives such as social status, security etc. similarly, these objectives may be classified as financial or personal objectives. Financial objectives are safety, profitability and liquidity. Personal and individual objectives may be related to personal characteristics of individuals such as family, commitments, status, dependents, educational requirements, income, consumption and provision for retirements etc CONSTRAINTS The last stage determining policies is to establish the constraints on the portfolio. The constraints means factors or limitations which decide the achievements of the objectives. There is a reasonable relationship between objectives and constraints. The following constraints are including a statement of policy: Portfolio risk level. Types of securities selected. Diversification Tax saving Liquidity Strategy

TWO TYPES OF PROCESS IN PORTFOLIO MANAGEMENT

The process of portfolio management provides a better understanding about the benefits, loss and the risks regarding the business.. The portfolio management is differentiated into two major types. They are the enterprise portfolio management process and the project portfolio management process. The enterprise portfolio management gives information regarding the amount of finance to be spent over the business and the requirement of the enterprise architecture The project portfolio management gives an analytical approach to the decisions over the sets of portfolio.

PORTFOLIO MANAGEMENT PROCESS

Portfolio management is a reasonably simple process. Unfortunately making something simple is not how the world operates. Portfolio management or even investment is made difficult by us because of our greed of earning extra ordinary returns without our homework and missing good investment opportunity because of fear of losing the money. Hence portfolio management is important. Portfolio management fulfils two important requirements of investors: one, the need to preserve money and second, the need to achieve good returns on the investment.

Adaptation
Stock portfolios allow for a high level of adaptation to market forces and industry trends. Unlike investing in a single stock, or a clutch of unrelated stocks, managing a portfolio allows investors to better predict events and forces that will affect their investment. If you have an industry- or market-specific portfolio, you can switch stocks in and out to respond to industry events. For instance, if new telecommunications regulations in the U.S. threaten the profits of American telecommunication companies, switching to telecoms in a foreign country can help keep your portfolio intact.

8 STEPS TO PORTFOLIO MANAGEMENT

Standardize and automate the governance processes. Define multiple workflows to subject each project to the appropriate governance controls throughout its life cycle from proposal to post-implementation resulting in lowered costs, faster cycle times, and increased quality Capture all investments within a central repository. Consolidate business and information technology (IT) investments within an enterprise repository to improve visibility, insight, and control. Implement repeatable processes as templates to standardize and streamline data collection across the organization. Centralized data facilitates cross project analysis of finances, resources, schedules as well as other data trends and status for informative reports. Objectively prioritize business strategy and competing investments. Employ proven techniques to define and prioritize your organizations business strategy for the upcoming planning period, and automatically derive objective prioritization scores to effectively evaluate the competing investments from multiple dimensions. Align the selected portfolios with the business strategy. Run optimization what-if scenarios to identify tradeoffs and select the optimal portfolio under varying budgetary and business constraints that best align with your organizations business strategy. Take advantage of advanced portfolio analytical techniques to identify and break the constraints prohibiting the portfolio from reaching the Efficient Fro Effectively manage resources. Without understanding long-term workloads and capacity, companies can experience inefficient hire-fire cycles, resulting in higher overhead, lost knowledge, and poor employee morale. By providing visibility into overall work commitments, actual timesheets, and resource capabilities, create resource plans to align your strategic recruiting and outsourcing with your long-term business objectives. Collaborate and coordinate easily. Helping to ensure that teams share common goals and work together effectively becomes more vital as organizations become more geographically and culturally diverse. Web-based access to timely, business-critical project information means teams can share knowledge, collaborate smoothly to complete tasks and deliverables, and adjust activities quickly to accommodate

 Measure and track portfolio performance. Effectively measure and track projects, programs, and applications throughout their life cycle, giving you the visibility to proactively identify potential issues, make decisions, and help ensure that your portfolios maximize return on investment (ROI) and improve operational efficiencies. Quickly realize a return on investment. By enabling increased employee productivity, faster cycle times, reduced costs, and improved time management, portfolio management solutions provide a positive and sustainable return on investment. In IT portfolio management, software can cut costs 2-5 percent, improve productivity 20-25 percent, and shift 10-15 percent of budgets to more strategic projects. In developing and bringing new products to market, the best performers those who have applied rigorous process and technology to their research and development and go-to-market activities can reduce time to market by more than 30 percent.

FEATURES OF PORTFOLIO MANAGEMENT

Portfolio management is managing a set of investment assets with the objective of maximizing the overall returns for the given risk. The important point to focus on is overall risk and return. Building a portfolio mix of stocks and bonds is a way to diversify the investment risk that arises as a result of concentrating the investment in one type of assets or few assets.

Facts about Portfolio

There are many investment vehicles in a portfolio. Building a portfolio involves making wide range of decisions regarding buying or selling of stocks, bonds, or other financial instruments. Also, one needs to make decision regarding the quantity and timing of the buy and sell. Portfolio Management is goal-driven and target oriented. There are inherent risks involved in the managing a portfolio.

Dynamic banking portfolio

The Power Shares Dynamic Banking Portfolio (Fund) is based on the Dynamic Banking Intellidex Index (Index). The Fund will normally invest at least 90% of its total assets in common stocks that comprise the Index. The Index thoroughly evaluates companies based on a variety of investment merit criteria, including: price momentum, earnings momentum, quality, management action, and value. The Underlying Intellidex is comprised of stocks of 30 U.S. banking companies. These companies include money center banks, regional banks or thrifts that are principally engaged in providing a range of consumer and commercial products and services including depository and cash management services; consumer and commerical loans; residential and commercial real estate loans; as well as other related banking services

OBJECTIVES
Short term high priority objectives: Investors have a high priority towards achieving certain objectives in a short time. For eg, a young people will give high priority to buy a house. Thus, investors will go for high priority objectives and invest their money accordingly. long term high priority objectives: Some investors look forward and invest on the basis of objectives of long term needs. They want to achieve financial independence in long period. For eg, investing for post retirement period or education of a child etc. investors, usually prefer a diversified approach while selecting different types of investments. low priority objectives: These objectives have low priority in investing. These objectives are not painful. After investing in high priority assets, investors can invest in these low priority assets. For eg, provision for tour, domestic appliances etc. Money making objectives: Investors put their surplus money in this kind of investment. Their objective is to maximise wealth. Usually, the investors invest in shares of companies which provides capital appreciation apart from regular income from dividend. Market returns are based on the midpoint of the bid/ask spread at 4 p.m. ET and do not represent the returns an investor would receive if shares were traded at other times. Performance data quoted represents past performance, which is not a guarantee of future results. Investment returns and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than performance data quoted. After-tax returns reflect the highest federal income tax rate but exclude state and local taxes. Fund performance reflects fee waivers, absent which, performance data quoted would have been lower. After Tax Held and After Tax Sold are based on NAV.

The basics and ideas of Investment Portfolio Management are also applied to portfolio management in other industry sectors . Application Portfolio Management: It involves management of complete group or subset of software applications in a portfolio. These applications are considered as investments as they involve development (or acquisition) costs and maintenance costs.The decisions regarding making investments in modifying the existing application or purchasing new software applications make up an important part of application portfolio management. Product Portfolio Management: The product portfolio management involves grouping of major products that are developed and sold by businesses into (logical) portfolios. These products are organized according to major line-of-business or business segment.The management team actively manages the product portfolios by taking decisions regarding the development of new products, modifying existing products or discontinue any other products. The addition of new products helps in diversifying the investments and investment risks. Project Portfolio Management: It is also referred as an initiative portfolio management where initiative portfolio involves a defined beginning and end; precise and limited collection of desired results or work products; and management team for executing the initiative and utilising the resources. A number of initiatives that supports a product, product line or business segment, are grouped into a portfolio by managers.

BASIC PRINCIPLES OF PORTFOLIO MANAGEMENT

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There are two basic principles for effective portfolio management which are given below:Effective investment planning for the investment in securities by considering the following factors Fiscal, financial and monetary policies of the Govt.of India and the Reserve Bank of India. Industrial and economic environment and its impact on industry Prospect in terms of prospective technological changes, competition in the market, capacity utilization with industry and demand prospects etc. Constant review of investment: Its require to review the investment in securities and to continue the selling and purchasing of investment in more profitable manner. For this purpose they have to carry the following analysis

To assess the quality of the management of the companies in which investment has been made or proposed to be made. To assess the financial and trend analysis of companies balance sheet and profit & loss Accounts to identify the optimum capital structure and better performance for the purpose of withholding the investment from poor companies. To analysis the security market and its trend in continuous basis to arrive at a conclusion as to whether the securities already in possession should be disinvested and new securities be purchased. If so the timing for investment or disinvestment is also revealed

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The Top Portfolio Management

Portfolio management software programs are one of the tools most widely used by individual investors. As an investors personal portfolio grows over the years, it often encompasses several investment accounts, including 401(k)s, IRAs, brokerage accounts and savings accounts. Tracking all these accounts accurately is an arduous task, and many investors need help. Luckily, the continuing development of technology has led to increasingly powerful portfolio management software aimed at providing just that. In this issues Comparison, we examine three portfolio management software programs Quicken Premier 2011, Investment Account Manager Version 2 and Fund Manager 11. These three software programs have each made appearances in our previous Comparison articles. They continue to be updated and improved, and we believe they still represent the best portfolio management software programs for individual investors.

Features & Functionality

Most capable portfolio management programs offer similar features. But software is rarely free, so matching your personal needs is a more important issue when choosing software than it is when you are choosing between the free online portfolio trackers. Our comparison grid on pages 24 and 25 details the features offered by our three top picks.

PMS is a well established hassle free option compared to direct e Strong marketing and operational support from the service provider. Attractive long term additional revenue. No competition with other offerings of the bank which is debt based. More choice in terms of portfolios to suit individual client needs and risk appetite Ability to structure products that meet specific investment objectives Increase in wallet share by cross selling to investor who is investing in direct equity. .

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Costs and Time Commitments

Investing in portfolio management software will inevitably come with certain costs. In addition to monetary costs, you need to consider the time you will spend learning to use the program. What it takes to configure the program, how easy it is to use and how well it can handle your personal needs will eventually become larger factors than the monetary cost of the program. In order to accurately gauge each programs (or websites) strengths and weaknesses, we make an effort to thoroughly use each service. Luckily, two of the three programs we review here offer fully functioning demos, allowing all potential users to try the software for themselves before purchasing (Quicken Premier 2011 does not offer a demo or trial version).

Securities/Assets Handled
The importance of a programs ability to handle a wealth of different securities cannot be overstated. When you are looking at a program, especially if you have a long investment horizon, consider not only whether it can handle the investments you currently own, but also whether it will be able to track investments that you may likely own in the future. Programs that specialize in certain areas, such as options, are available, but for the purposes of this comparison our focus is on programs that support the securities that most individual investors own, including stocks, bonds, mutual funds, exchange-traded funds and real estate. A programs ability to distinguish between asset types is particularly important, as it ensures that asset allocation and industry reports will be generated correctly. The technology vendor community has only recently begun providing portfolio management solutions for lending, and to date most solutions have been focused on mainly mortgage or commercial lending. However, the financial crisis has accelerated interest in portfolio management solutions in order to reduce loss and execute loan modification more proactively, particularly in the area of mortgage loans (and advanced mortgage analytics) given they have been in the most distress to date. We suggest evaluating your existing analytics capabilities against loan portfolio management solutions clearly, its never been more important to address business opportunities and challenges quickly in order to maintain liquidity and drive new revenue

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Implementation of Portfolio Management

On July 8, 1993 the Executive Directors of the World Bank approved "Next Steps: A Program of Action," based on management's proposals on how to implement the recommendations of the Portfolio Management Task Force. The main objective of this program is to ensure that the Bank obtains better results on the ground, thereby increasing the development impact of its operations. Over the past year, steady and substantial progress has been made towards increasing the Bank's focus on implementation and portfolio performance. This document highlights the progress and changes that have been or are being made by the Bank to increase development impact. Out of a total of 87 actions promised, more than 90 percent have either been fully completed or are at an advanced stage of completion. The recommended actions deal with the following seven major areas that affect portfolio management: 1) link country portfolio performance to the Bank's core business practices; 2) provide for more active project and portfolio restructuring; 3) improve the quality of projects entering the portfolio; 4) define the Bank's role in, and improve its management of, project performance; 5) enhance OED's role as an instrument of independent accountability and give greater emphasis to ex-post evaluation; 6) create an internal environment that promotes better portfolio management; and 7) give attention to generic and institutional factors that affect portfolio performance. This paper summarizes progress in each of these areas.

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REPORTS
Reports allow you to analyze your portfolio and investments. The three programs covered here vary in the type and flexibility of reporting they offer. When choosing a program, be sure to check whether the program generates not only the types of reports you want, but also other types of reports you may not currently use in your analysis. These extra reports might enhance your overall evaluation of your portfolio. While you want to be sure that a program provides enough flexibility and functionality to complete your analysis, again, you should consider possible future needs with regard to reporting capabilities . The comparison grid lists the main report types offered by the top portfolio management programs. The current holdings report lays out the composition of your portfolio. At a minimum, programs will list the securities that are held, along with units, costs and current market value. Most software programs will also provide certain asset allocation and gain/loss data right on the main page. The holdings by lots report breaks down portfolio composition into finer increments, indicating each purchase at a specific date and price. This gives you a detailed history of your transactions and provides guidance for selling. Tax schedules pertain to the Schedule B and Schedule D IRS forms. Designed for computing interest and dividends received from a portfolio, Schedule B reports allow you to estimate tax debt (or credit) before year-end statements arrive. Tax Schedule D reports compute long- and short-term capital gains and match assets that will yield capital gains with tax liabilities. Ideally, the program should also track foreign taxes withheld on your securities to help ensure that proper credit is accounted for when filling out your taxes. Tax reports are provided for a given tax year, so programs generally include a dialog to select the year to report upon. Tax reports can be tricky and, if your situation is complex, it may be prudent to consult with a tax professional. None of these programs specializes in tax reporting, so their capabilities may be limited depending on your investments and trading behavior. The projected cash flow report serves as a forecast of the expected portfolio cash income from dividends, interest and bond maturities. This report is especially useful for investors who rely heavily on income-related investments, such as investors in retirement. Bond maturity schedules can assist investors in redeploying capital that is coming due. Report customization can be content-related (for example, allowing you to choose the time period) or cosmetics-related (for example, allowing you to select column and row headings or even font size). Portfolio alerts let you know when a security has crossed some predetermined price threshold. Such an alert may highlight a need for investigation that might otherwise go unnoticed.

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PERFORMANCE REPORTS
A basic part of the portfolio management process is to determine and analyze performance. The comparison grid summarizes each programs performance reporting capabilities. Performance reports are discussed more fully in the individual program summaries that follow. A program should provide reports for securities, industries and asset classes; these reports should include performance and asset allocation analysis. Some programs allow for an examination among various asset classes, while others provide industry, section and individual security breakdowns. Reports covering single and multiple portfolios are important in order to fully address the diversified aspects of all your accounts . All three programs discussed here also offer reports based on between-period returns, which allow you to monitor security performance during a known market environment. The programs store snapshots of your portfolios at various times and provide information on how portfolios perform during different market cycles. Certain portfolio management programs offer the ability to calculate both a value-weighted (also referred to as a dollar-weighted) internal rate of return (IRR) and a time-weighted rate of return. The IRR tends to be the best gauge because it represents the rate of return earned by your investments. It considers the time when inflows and outflows are made to the portfolio, the amounts of these flows, and the combined impact upon the overall rate of return. The time-weighted return is most often used to analyze the performance of investment decisions made by a money manager. A time-weighted calculation directly ignores the impact of any cash added to or removed from the portfolio. However, inflows and outflows should be considered by individual investors, not only because an individual does have control over them, but also because they are very common in retirement accounts and will have a large impact on the portfolios rate of return.

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PORTFOLIO MANAGEMENT SERVICES

ICICI Bank Wealth Management will assist you for Portfolio Management Services (PMS) by referring to our partner Asset Management Companies. Our partner Asset Management Companies conduct detailed and scientific analysis of various investment avenues to help you invest your money.

PMS can be Equity-based Products Commodity-based Products Index-linked Products ICICI Prudential Portfolio Management Services provides solutions for the investment needs of select client, through focused portfolios. ICICI Prudential AMC was the first institutional participant to offer Portfolio Management Services to HNIs and Institutions in India, in the year 2000. We have a successful track record of over 10 years of experience in offering Portfolio Management Services and today our strong base of over 7,000 PMS clients stands testament to the quality and value of our services. Our aim is to create a portfolio that suits your requirements; therefore we will first seek to understand a clients needs and investment objectives, and on that basis offer a portfolio that best suits these needs and objective

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ICICI BANK INVESTORS CAN EXPECT 20% RETURN IN 9-12 MONTHS

With a strong set of numbers, most analysts keep a 'buy' recommendation on the stock and expect it deliver a robust 20 per cent return in the next 9-12 months from current levels."ICICI Bank is looking strong from all its peers and is showing remarkable resilience with respect to the external environment which is slowing down," Sanjeev Agarwal, Managing Director at Dynamix Research & Capital Management Pvt Ltd, said. "Investors and traders can buy at current prices and add on any dips for around 20 per cent returns in the next 2-3 months."The private sector bank reported a net profit of Rs 1,815 crore for the quarter ended June 2012, up 36.2 per cent from a net profit of Rs 1,332.2 crore in the corresponding quarter a year ago. According to an ET Now, the bank was seen posting a net profit of Rs 1,700 crore.ICICI Bank expects to sustain the current level of net interest margin and sees an improvement in asset quality of the bank, Chief Executive Officer Chanda Kochhar said on Friday. "ICICI Bank reported an impressive set of numbers in a challenging quarter. Net interest income reported significant 30 per cent growth YoY during the quarter predominantly due to rising yields on the assets and net interest margins came stronger at 3.5 per cent during the quarter," Vinayak Kanvinde, Portfolio Manager at Right Horizons, said. "We believe ICICI Bank would end up growing its book at over 20 per cent during FY13 and that makes us assign a 2.0x P/B for FY13 or a target of around Rs 1,175 per share over the next 9-12 months," he added.On the asset quality front, the private sector bank reported lower gross non-performing assets at 3.54 per cent against over 4.35 per cent last year. Net non-performing assets are 0.74 per cent.The bank's provisioning for these NPAs is marginally up at Rs 466 crore against the June 2011 quarter, ICICI said in a filing with the BSE."ICICI Bank's results so far are indeed very good. My only issue is when an economy is going through a slowdown and when most companies are going through restructuring, how can large banks report strong results?" Hemindra Hazari, Head of Equity Research at Nirmal Bang Institutional Equities, asked. "Major banks reported a strong set of numbers for the quarter, but the broader issue is: are these numbers sustainable for the banking industry when corporate results are really By and larged is appointing because of margin pressure?

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VALUATIONS OF BEST INVESTMENTS PLANS

ICICI Bank has the right set of fundamentals for a long-term story and that's the key reason for most analysts to favour the stock in the banking space. "ICICI Bank trades at a valuation of 1.7x p/b currently, which is around a 25 per cent discount to its historic valuation range and we think there is considerable upside from current levels given the book has grown 4.4 per cent sequentially (QoQ) translating into 17 per cent annualized book growth," Kanvinde said. "ICICI Bank is still trading at almost 45-50 per cent discount to HDFC Bank," Vaibhav Agrawal, VP - Research, Banking at Angel Broking, said. "Earnings growth is likely to sustain at least 20 per cent levels, which is quite good in the current environment. It is still trading cheaper than some of its peers like HDFC Bank, leaving scope for re-rating," added Agrawal. Gajendra Nagpal, CEO at Unicon Investment Solutions, advises investors to buy ICICI Bank as it is the least expensive stock in the sector (trades at 1.4x FY13 adj. book). "Risk return is attractive for the stock with RoEs trending up to +16.5 per cent by FY14 and possibly 18-19 per cent by FY16, without requiring fresh capital." "ICICI Bank has reported a good set of numbers in the last 2-3 quarters. Its focus on controlling NPAs is now paying off and the bank is focusing on expanding its book. We advise to stay invested in the bank," Rajesh Samtani, Vice President - Portfolio Management at Anand Rathi, said. Rajat Bose of rajatkbose.com is of the view that ICICI Bank can always be bought on dips for a medium-term perspective with a target of Rs 1,080 to about Rs 1,100 on the upside with a stop loss of Rs 880. Rajiv Mehta, Research Analyst at India Infoline, said ICICI Bank was the top sectoral pick. "We were expecting very strong numbers from ICICI Bank and if you look at the results, it has really surprised us and the performance has been extremely robust from the perspective of overall revenue growth, NIMs and asset quality."

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ICICI Portfolio Management

Asset management firm ICICI Prudential's real estate portfolio management service (PMS) today said it has divested investment in KUL Ecoloch, a township project in Pune. ICICI Prudential PMS real estate portfolio, a part of ICICI Prudential AMC, had invested Rs 47.5 crore in the 105-acre integrated township in Pune developed by realty firm Kumar Urban Development (KUL), a company statement. The investment generated a gross internal rate of return (IRR) of about 27 per cent. "We believe in the tremendous potential of the realty space that is synchronous with India's growth and are always looking at providing opportunity to our investors to participate in this asset class," ICICI Prudential AMC Head - Real Estate Rahul Rai said. He said the investment in KUL Ecoloch and successful exit was a reinforcement of the return potential of this segment and the strength of our investment process that has helped accomplish this feat. ICICI Prudential PMS real estate portfolio has been managing capital commitments of more than Rs 750 crore since its inception and has made 14 investments across Mumbai, Bangalore, Pune, Chennai and NCR, the release said. Earlier in April, 2010, the portfolio had made its first exit by divesting its investment in DS Kulkarni Developers' Bangalore project, generating deal level IRR of about 22 per cent Anand Rathi-Knight Frank India Fund and portfolio management services (PMS) arms of HDFC Asset Management Company, ICICI Prudential AMC and others are looking at launching trust structures to float their next funds in the real estate sector. The portfolio services of these asset management firms have cut a number of deals in the Indian real estate segment in the last two years, emerging as a major source of funding for property developers. However, Securities and Exchange Board of Indias (Sebi) February 2012 regulations on portfolio managers, which disallowed pooling of accounts and raised the minimum investment size to Rs 25 lakh, is prompting PMS managers to look at trust structures, where pooling of accounts is allowed and managers can mop up lower ticket investments.Anand Rathi-Knight Frank, which raised its first fund on a PMS platform earlier, is looking at raising a Rs 500 crore through the trust route in the first quarter of the next financial year.

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The most challenging part in the Sebi regulations is that you have to segregate the accounts under PMS. Each investor has to be issued separate share certificates and debentures. It becomes a public limited company then, said Amit Goenka, national director, capital transactions, at Knight Frank India. We are looking at a trust structure because pooling of accounts is allowed, and we can raise lower ticket investments. Besides, they enjoy pass through status as per the recent Budget proposals, Goenka added.In the trust structure, a fund manager (sponsor) sets up a trust and appoints trustees after securing approval from Sebi. Investors or unit holders will appoint the sponsor as fund manager to the fund. Investors will put money in the trust, which in turn becomes a client of the fund manager for a particular strategy. The entry and exit of the investors takes place through the trust. We are looking at it (trust structure), but we have not finalised anything so far, said Milind Barve, managing director and chief executive, HDFC Asset Management Company. A mail sent to ICICI Prudential PMS did not elicit any response. There is a challenge before PMS managers now, and business would be affected. That is why most of us are looking at different structures, said the real estate head of a Mumbaibased leading asset management company. Many fund managers would also look at the final Alternative Investment Funds regulations to be notified by Sebi before finalising their strategies, he said.

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PORTFOLIO MANAGEMENT IN TOUGH ECONOMIC TIMES

The implementing of the effective portfolio management is very challenging in the difficult economic conditions. The market volatility and uncertainty exerts pressure on the portfolio managers and investors to minimize the risks and still generate good returns or maintain their investments if not growing them. Facing the challenges Portfolio Managers should be prepared to deal with tough market conditions so that they can spend money on and resources on their vital investments. As per the experts and analysts, the economy magnifies the impact of challenges rather than creating any new challenges. Some of the vital challenges faced by Portfolio Managers are

Deciding to take an initiative before its scoped out. Ensuring that right resources are used on most important securities Managing the portfolios outside their politics Modifying the existing projects and investments in efficient manner so as to maintain the portfolio returns in difficult market conditions

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Fewer Funds available for investments in portfolio The difficult economic conditions usually left the investors with fewer dollars available for maintaining or growing their portfolios. There are many portfolio managers or investors that cut down on their investing for new assets or securities. The costs of maintaining and managing the portfolio increase with the number of securities or assets. The portfolio managers focus on finding ways for sharing the resources between various stocks. Assessing the Applications and Systems The portfolio managers can also assess the applications and systems to cut down the costs and evaluate their worth to the company. The PMs can get rid of various unnecessary tools and outdated systems that are incurring huge costs to the company.

Efficient Portfolio Management Every proposed investment should be carefully assessed to ensure there is efficient business case for the portfolio. It should also go through a standardised process depending on the unique goals of the organization. A proper planning is required for formulating various metrics and processes. After selecting the stocks to be invested, the optimal portfolio is finalised and swift action should be taken. The efficient optimization and management of the portfolio should be done for ensuring that portfolio will generate good returns at an acceptable level of risks even in difficult economic times. The product portfolio management involves grouping of major products that are developed and sold by businesses into (logical) portfolios. These products are organized according to major line-of-business or business segment. The management team actively manages the product portfolios by taking decisions regarding the development of new products, modifying existing products or discontinue any other products. The addition of new products helps in diversifying the investments and investment risks.

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Major tasks involved with Portfolio Management are as follows. Taking decisions about investment mix and policy Matching investments to objectives Asset allocation for individuals and institution Balancing risk against performance As per the modern portfolio theory, a diversified portfolio that includes different types or classes of securities; reduces the investment risk. It is because any one of the security may yield strong returns in any economic climate. Portfolio Management Corporation is an independent investment firm providing professional discretionary portfolio management services to individual investors and families in North America and abroad with investable assets of C$1,000,000 or more. Founded in 1964 in Toronto, Canada, our firm is committed to delivering personalized investment service to our clients. We provide a highly customized service. We construct and maintain investment portfolios - made up of stocks, bonds, and cash - tailored to each client's unique needs. We meet regularly with our clients to review their investment goals and results.Our mission is to preserve and enhance our clients' wealth Portfolio Management is used to select a portfolio of new product development projects to achieve the following goals: Maximize the profitability or value of the portfolio Provide balance Portfolio Management is the responsibility of the senior management team of an organization or business unit. This team, which might be called the Product Committee, meets regularly to manage the product pipeline and make decisions about the product portfolio. Often, this is the same group that conducts the stage-gate reviews in the organization. A logical starting point is to create a product strategy - markets, customers, products, strategy approach, competitive emphasis etc. The second step is to understand the budget or resources available to balance the portfolio against.Third, each project must be assessed for profitability (rewards), investment requirements (resources), risks, and other appropriate factors.

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HSBC Overview
The HSBC Group is one of the largest banking and financial services organisations in the world. The Group has around 7,500 offices in 80 countries and territories in Europe, the Asia-Pacific region, the Americas, the Middle East and Africa, serves over 100 million customers and has assets of USD 2,691 billion as at 30 June 2011. HSBC Global Asset Management in India is part of the core global investment management business of the HSBC Group. With dedicated investment professionals across Europe, Africa, Asia-Pacific and the Americas, HSBC Global Asset Management has strong global investment capabilities that are delivered to clients locally. For institutions, corporates and financial intermediaries, a comprehensive range of investment management solutions are offered. For high net worth individuals, HSBC Global Asset Management works with relationship managers to provide bespoke portfolio management services. A Guide to HSBC Portfolio Management Service HSBC Global Asset Management, India started its Portfolio Management business on 27 March 2006. PMS business offers segregated mandate and advisory solutions to large institutional investors, insurance companies, High Net Worth Individuals (HNWIs), etc. PMS is currently managing 4 Portfolios plus EPFO, apart from advisory and institutional mandates. HSBC Asset Management (India) Pvt. Ltd., under its PMS platform, has been mandated (one of four) fund managers by The Employees Provident Fund Organization, India (EPFO) for managing USD 10 billion provident fund monies over 3 years. EPFO is one of the largest provident fund institutions in the world. The mandate puts us in the top league of asset managers in the country, and positions us well to handle similar institutional/trust/PF mandates.

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HSBC Bank Portfolio Management

HSBC Bank has launced its Premier Investment Management Service; a new discretionary investment management service designed to meet a variety of customer risk appetites and objectives. The Premier Investment Management Service is designed to appeal to a wide audience through a suite of eight actively-managed portfolios. There are five risk adjusted, unconstrained models designed for customers with various risk appetites including Cautious, Conservative, Balanced, Dynamic and Adventurous. These models contain a wider range of asset classes, including private equity and commodities, helping to provide the customer with a less volatile investment journey. Also available are portfolios to suit the needs of Socially Responsible Investment* and Higher Income, as well as a Trustee model. The new service adopts the same portfolio management philosophy behind HSBC's popular World Selection portfolios, which provide globally diversified multi-asset solutions throughout the market cycle. The portfolios are managed by a team of investment professionals led by Alec Letchfield, Chief Investment Officer, UK Wealth, at HSBC Global Asset Management. David Wells, Head of Pensions, Investments and Savings at HSBC Bank, said: "The Premier Investment Management Service has been designed following significant investment in understanding customer requirements. Highlighted as particularly important is a fair and transparent charging structure, so our new service has been designed specifically to meet this demand." "Furthermore, HSBC is offering customers a service rather than just a product. In addition to providing segregated portfolios, customers have an annual review to ensure their portfolio continues to meet their investment needs and attitude to risk. In addition, a capital gains and ISA planning service is included." This new service should help to further cement HSBC's position as a leading provider of wealth management solutions for its customers, Wells added. HSBC Bank currently manages more than 16bn in wealth management solutions for UK customers. The Premier Investment Management Service is available for a minimum investment of 150,000. Charges are banded (a full schedule of charges is listed below). The service is available via HSBC's Premier Independent Financial Advisors and Commercial Independent Financial Advisers.

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Areas of Business
Individual We launched our first portfolios, HSBC Alpha Account Signature Portfolio and HSBC Alpha Account Strategic Portfolio in 2006. Today we operate a broad range of portfolios. These are designed for investors who seek capital appreciation through investment in equity and equity related instruments. Our portfolios are built around our expertise in Indian equities. They also reflect our active, unconstrained, management approach. From this comes a range that meets the different needs of our investors. You may engage us to manage your investments if you: Desire customised investment solutions (Above a minimum threshold) Desire consistent investment returns Lack sufficient time to adequately monitor and manage a portfolio Lack sufficient interest in the financial marketplace to obtain the desired result Lack sufficient knowledge and experience with the financial marketplace to safely manage the portfolio. Institutional PMS offers segregated mandate and advisory solutions to a wide range of institutions including institutional investors, large individual investors, welfare trusts, fund of funds among others. This includes mandates where both the advisory and execution on the portfolio are conducted by us, as well as mandates wherein we only provide advice on a non binding basis, and the final investment decision and execution is undertaken directly by the customer. HSBC Portfolio Management Services can offer customised investment solutions for each client based on specific requirements and investment objectives. However, these are offered above a certain prescribed threshold which at the discretion of the Portfolio Manager may be changed from time to time. While institutional investors can benefit from segregated portfolio

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Product Manager - SB Regular Portfolio Management (CIB)

Responsibilities

Co-ordinate with branches & channels, take ground level inputs, conceptualize initiatives for CIB growth in SA Regular Non Managed portfolio SA Attriting Customers SA Inactive Customers with no transactions in past 3 months and above SA Credit inactive customers SA Low product penetrated customers (balance build up products) Racing of Eligible and Potential customers from Non Managed to Managed portfolios Co-ordinate with different Channels for shaping up the activities end to end (Fincon; CIU; Branch control unit ; Imperia / Preferred / Classic / COP/ PBG; BBG; Branches). Once initiative is conceptualized and agreed upon by all stakeholders, push / drive the same through resp channels and measure results. Ensure effective & efficient execution of initiatives on existing SB Reg portfolio through channels for positive CIB growth by. Releasing ongoing business updates Releasing Did U Know series to share key points for driving initiatives Releasing Success stories and best practices followed Analyze and study CIB target achievement trends of branches for SA Reg across BBH regions assigned wrt various portfolios and SA variants and support branches in meeting CIB target. Study CIB movers and shakers within the regions assigned. Call branches and know reasons for the large debit / large credit accounts and know timelines for fund flow and give inputs for ALCO Projections. Analyze region specific trends impacting SA balances. Get insights on Product vis a vis Competition and give business inputs.Analyze trends of attriting accounts v/s growing accounts, inactive accounts , eligible customers with corresponding value attrition and value growth in existing base. Analyze RM/PBs/BM resource wise CIB enhancement target and their bandwidth wrt further racing and get racing of non managed customers to managed portfolios.

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 On a Monthly basis, for specific BBH regions assigned, identify min 10 branches having high CIB base and not meeting plan/ attriting. Visit these branches to get deeper understanding of the branch book, HNW portfolio trends wrt deepening / enhancement /cross sell product penetration & usage / racing activity / large movers and shakers affecting CIB, mix of customers, profile of customers, share portfolio insights as per Product analysis, support & suggest activities to improve CIB, support with requisite data and finally follow through the activities and share outcome. During these branch visits meet customers jointly along with Rms / Bms for value build up and product cross sell. On a Monthly basis, for specific BBH regions assigned, identify other underperforming branches on NCIB (other than branches targeted for personal visits). Have concalls with BMs / PBs / Rms of these branches Review CH-Branch Visit Reports for regions assigned and share business inputs with CH / corrective action and track the same Base adjustments for respective regions assigned to be taken care with coordination with fincon and branches. Portfolio Management Styles

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Purpose of Client Documentation

Execution of Discretionary Portfolio Management Services Agreement for availing of HDFC PMS Bank and Depository Account opening forms- to open separate and individual bank and depository accounts for each client Power of Attorney to be issued by client in favour of HDFC AMC to operate the bank and depository accounts on behalf of the client Disclosure Document to understand HDFC AMC as Portfolio Manager and its services. PMS Client Registration Form- to `Know your Customer Risk Factors Securities investments per se are subject to market risks and there can be no assurance or guarantee that the objectives will be achieved. Investment in securities, the value of the portfolio under management may go up or down depending upon various factors and forces affecting the capital markets Investors in PMS are not being offered any guaranteed /assured returns Each Client is advised to consult his/her own Financial Advisor/ Professional tax advisors before availing of PMS Security classifications used in calculating allocation tables are as of May 31, 2012. There are risks involved with investing in ETFs, including possible loss of money. Shares are not actively managed and are subject to risks similar to those of stocks, including those regarding short selling and margin maintenance requirements. Ordinary brokerage commissions apply. The Funds return may not match the return of the Underlying Index. The Fund contains securities in banking industry. Companies engaged in this industry are subject to greater risks, and are more greatly impacted by market volatility, than more diversified investments. Investments focused in a particular industry are subject to greater risk, and are more greatly impacted by market volatility, than more diversified investments. Investing in securities of small and medium-sized companies may involve greater risk than is customarily associated with investing in large companies. The S&P Composite Commercial Banks Index (S&P Commercial Banks) consists of all commercial bank stocks included in the S&P Composite 1500 Index. The Dow Jones U.S. Banks Index and the S&P 500 Index are unmanaged indexes tracking U.S. banking stocks and the U.S. stock market, respectively. The Global Industry Classification Standard was developed by and is the exclusive property and a service mark of MSCI, Inc.and Standard & Poor's LLC in connection with the Power Shares Intellidex investment products. The products are not sponsored or endorsed by NYSE Arca, and.

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Goals-based investing that puts your needs first. These days, the path to investment success is rougher and more rugged than ever. Advice and assistance from an experienced portfolio manager could make all the difference between achieving your financial goals and falling short. For more than 80 years, First Financial Wealth Management has been developing and managing customized portfolios that seek to drive success. With First Financial Wealth Management, a division of First Financial Bank, our clients benefit from a strong and successful partner to help manage their personal goals.

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Our investment process revolves around the needs of our clients. We employ a systemic approach to investment management that includes: Asset allocation. We establish recommended guidelines for balancing the need for diversification with the desire for higher risk-adjusted rates of return. Our strong belief in the power of diversification results in our clients' investment portfolios typically including allocations to a variety of asset classes, management by multiple investment managers and a mixture of strategies. Investment research. Our research team identifies core and alternative investment choices within the framework established by the Investment Committee. That group of experienced investment professionals selects the investments that have the potential to provide above-market returns at acceptable risk levels. Portfolio construction. Through our knowledge of financial market history, current market conditions, and the specific needs of clients, we establish guidance for how portfolios should be constructed. Your dedicated portfolio manager combines an understanding of your objectives with knowledge of the financial markets to implement a skillfully tailored portfolio. Portfolio Management. Through a series of tactical decisions, we respond to changing financial market opportunities. We are responsible for analyzing new asset 7*categories to determine which might be beneficial to clients and how they might be incorporated into client portfolios. Portfolio managers around the world face greater challenges than ever before. Conventional asset markets - money markets, fixed income and equities - continue to be buffeted by frequent shifts from 'risk on' to 'risk off' driven by sovereign debt concerns and the weakness in developed world growth. Although emerging economies have much stronger fundamentals, they have been deeply affected by such turbulence. At the same time, doubts about the merits of new financial instruments and techniques remain. Meanwhile, the basis of modern portfolio theory has been brought into question. For some Portfolio Managers, this has led to a renewed emphasis on security selection; some have looked to new methods of portfolio construction, and others have turned to the findings of behavioral finance in a search for a better understanding of portfolio construction. In this five day Portfolio Management Academy, we address these current issues facing portfolio managers around the globe. The Academy is suitable for fund managers and trainee fund managers, seeking a broader perspective on their day-to-day investment decisions.

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Portfolio management services offered by banks and brokerages

There are multiple regulators involved and discussions are underway." RBI governor Duvvuri Subbarao and securities regulator chief UK Sinha have said practices that are not fair and transparent won't be tolerated. While investors are mostly happy when returns are above expectations, they turn around and often accuse managers of having duped them when returns are low. They usually provide power of attorneys to the mangers to transact on behalf of them. "It is time for Sebi to act," chairman UK Siha had told ET in an interview. Complaints have been on the rise in the past few months in a volatile market where fund managers are not able to generate the kind of returns they promised clients, mostly orally. Citi and Standard Chartered are compensating for hundreds of crores of losses incurred on clients' money. "In cases where a customer signs a power of attorney and transactions have been processed, banks should have trail to the authorisations given," said a member involved in the discussions . "Banks would also have to send relationship managers on mandatory leave and also resort to rotation." There needs to be at least a confirmation from clients. "You see a power of attorney is not something which is forced upon the customer," Mr Sinha said. "It is done through mutual consent between the parties. We are looking at various means as to ensure that there is a record of confirmation that something has been done in consultation with customers and with his knowledge and acceptance." Just ahead of guidelines, banks and boutique wealth management institutions are putting checks and balances in place. Citi, which was the first to be hit by a Rs 400-crore scam in the business, has increased contact with customers by members of the supervisory chain.

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Portfolio Management of the Free Banks of Illinois: An Examination of Historical Allegations

The period between 1836 and 1863 constituted an era of free banking in the history of the United States. During this time, withdrawal of regulations by federal and state governments left the banking industry relatively free. Any person or association of persons could open a bank without legislative charter or permission. The opening of a bank was relatively easy. The only restriction was the capital requirement which was limited to not less than $50,000. The liability provision of the bank was "limited." The shareholders of the bank were liable to the amount of their stocks. During the early stage, banks could be opened in any city, town or village without any population restriction. However, in 1854 and 1857 restrictions of varying numbers were imposed. For example, a bank could not be opened in a locality with a population of less than 1,000. As a result of the relative ease of banking there was a large growth of financial institutions. The literature on free banking has sharply altered its focus in the last two decades. While the alleged failures of free banking have been closely analyzed and shown to have been greatly exag- gerated the link to fractional-reserve banking has been missed in the literature so fat Emodern study of Illinois free banking, mentions this issue and we would like to draw out its full implication. During the period between 1852-1863 a total of 131 banks closed in Illinois. So it was alleged that free banking led to bank ailures and "wildcat" banking, i.e., that banks were engaged in issuing liabilities without any cash reserves in their vault or capital and assets to protect these liabilities. Note holders in particular were at risk. In order to avoid payment of the liability holders'claim, banks were said to have resorted to various unfair practices such as holding fake specie reserve and locating bank offices in an unknown or inaccessible place where they would be difficult to find.

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Portfolio of the Illinois Free Banks and Evidences

Like any other business corporation, the Illinois bank of the antebellum period was a private firm that provided depository as well as note-issuing services. The banks were engaged in manu- facturing and retailing "money" in their quest for profits subject to some constraints. While the banks held deposits from the individuals and businesses and issued notes to support their loans, banks were required to deposit an equivalent amount of the U.S. or state bonds to the State Auditor. These bonds were valued a t the market price, not a t their face value. Their lending policy was also subject to some legal restrictions. The bank could not legally charge more than seven percent although the market interest rate was higher than seven percent. The bank's objective was to increase its shareholders'wealth. Profit maximization depends on successful portfolio management. Striking a balance between profitability and liquidity is the key concept for successful bank management. A prudent banker must choose assets, including liquid reserves, to ensure adequate protection from illiquidity while generating enough income to stay in business. This is not an easy task. Given a banker's preference for risk, portfolio choice becomes a function of the structure of asset and liability influencing risk and return. Although bankers' risk preference differed across banks, the bankers of Illinois free banks, in general, are assumed to have been risk averse instead of risk lovers. Unlike today, there were no reserve requirements in the free banking era. As a result, a bank's own assessment of risk and return decided the portion of the total assets to be held in reserves. The banks of this period could issue deposit and note liability, apparently, without any restriction of reserve require- ments. However, banks were required to deposit 100 percent U.S. or state bonds to the State Auditor as collateral to support their banknotes. Article 2 of the Free Banking Act of illinois states:

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Thus as long as a bank could provide US.or State bonds as collateral for the amount of note-liabilities, there was no restriction on a bank to issue notes. Illinois free banks were subject to much harder restrictions than the present commercial banks; like the demand deposits, the notes of the free bank issued were required to be redeemed in specie (gold and silver coin) on demand whenever they were presented to the counter of the bank. If a bank failed to redeem its notes on demand, the note-holder 60 The Review of Austrian Economics Vol. 9, No. 1 had a legal right to sue and close the bank. Such a right of closing a bank lent an added emphasis for liquid reserves in the portfolio management of the free banking system. The study of free banks' reserves, and their liquidity in particular, must be analyzed from the context of the economic environment in which the banks operated and the aggregate structure of their assets and liabilities. Economic Conditions An understanding of Illinois economic conditions in the 1850s-the structure of its population, agriculture, industry and transport-is essential for the study of banks' portfolio management, and lending behavior in particular. In the 1850s Illinois was making a rapid transition. It attracted a special breed of migrants during the second quarter of the nineteenth century. Whereas the earlier migrants of Illinois were, as Governor Ford described, "unambitious of wealth and great lover of ease," the new migrants, "Yankees" in particular, who moved from the eastern provinces were great lovers of unending wealth and risk. They were talented workers, capitalists and above all entrepreneurs. They were extremely eager for bank credit to build up their fortune. During the 1830s and 1840s there had been tremendous development of river, canal, and railroad transport in Illinois. This transport development paved the way for the development of agriculture, industry, and commerce. The prairie land of Illinois was brought under large and commercial farming. Investments in agricultural implement and machinery demanded the release of bank credit to help sustain the growth of agriculture. The surplus produce of commercial farming had to find markets. People involved in marketing needed capital. Bank credit was the only source which could provide financial support to their needs. Thus the need for capital, bank credit in particular, was fundamental to the farmers, manufacturers, and merchants. The state desperately needed bank credits to meet the economic needs of the people at the time. The market for bank credits already existed. Only local banks and their supply of bank credits were absent. "After the general crash in 1837, the state (Illinois) was without banking associations until 1851

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RBI TELLS ABOUT PORTFOLIO MANAGEMENT

RBI has asked us to furnish details of the various parameters of portfolio management services like nomenclature, the products offered and the disclosures we make to clients about risks and returns said a senior official of a public sector bank. Most foreign and private banks, along with a few public sector banks, offer portfolio management services . RBI also wanted to know if there was any actual, perceived or potential conflict of interest in offering such products and a banks responsibility or obligation towards its clients. It also asked whether the people selling these products were qualified and whether there was a proper criterion for employees offering such services. Banks would also have to provide information on the number of complaints and the performance of their grievance-redressal mechanism. Portfolio management services offered by banks are classified into four categories referral services, investment advisory, non-discretionary and discretionary. Sources said the current norms do not clearly distinguish between investment advisory and nondiscretionary portfolio management services. Currently, to offer portfolio management services, banks need RBIs approval. They also have to be registered with Sebi. Registration with Sebi is also required to offer investment advisory services, which are non-discretionary in nature (the clients approval is required for investment). The RBI communique follows a fraud in Citibanks branch in Gurgaon in December 2010. The fraud was allegedly committed by its employee, Shivraj Puri, who had siphoned off Rs 400 crore by selling financial products not authorised by the bank. The investment products were allegedly sold to high net-worth individuals, with a claim that these would generate very high returns. RBI had, earlier this week, sent mails to various chief executive officers of banks, asking for the details of their operations. It sought to know under what name various products were sold whether they came under portfolio management, wealth management, private banking or investment advisory. RBI guidelines pertain to portfolio management services.

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PORTFOLIO MANAGEMENT ON BEHALF OF CLIENTS

i) The general powers vested in banks to operate PMS and similar schemes have been withdrawn. No bank should, therefore, restart or introduce any new PMS or similar scheme in future without obtaining specific prior approval of the RBI. However, bank-sponsored NBFCs are allowed to offer discretionary PMS to their clients, on a case-to case basis. Applications in this regard should be submitted to the Department of Banking Operations and Development (DBOD) ii) The following conditions are to be strictly observed by the banks operating PMS or similar scheme with the specific prior approval of RBI: (a) PMS should be entirely at the customer's risk, without guaranteeing, either directly or indirectly, a pre-determined return. 25 DBOD MC Prudential Norms on Investments - 2009 (b) Funds should not be accepted for portfolio management for a period less than one year. (c) Portfolio funds should not be deployed for lending in call/notice money; interbank term deposits and bills rediscounting markets and lending to/placement with corporate bodies. (d) Banks should maintain client wise account/record of funds accepted for management and investments made there against and the portfolio clients should be entitled to get a statement of account. (e) Bank's own investments and investments belonging to PMS clients should be kept distinct from each other, and any transactions between the bank's investment account and client's portfolio account should be strictly at market rates. (f) There should be a clear functional separation of trading and back office functions relating to banks own investment accounts and PMS clients' accounts. iii) PMS clients' accounts should be subjected by banks to a separate audit by external auditors as covered

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iv) Banks should note that violation of RBI instructions will be viewed seriously and will invite deterrent action against the banks, which will include raising of reserve requirements, withdrawal of facility of refinance from the RBI and denial of access to money markets, apart from prohibition from undertaking PMS activity. v) Further, the aforesaid instructions will apply, mutatis mutandis, to the subsidiaries of banks except where they are contrary to specific regulations of the RBI or SEBI, governing their operations. vi) Banks / merchant banking subsidiaries of banks operating PMS or similar scheme with the specific prior approval of the RBI are also required to comply with the guidelines contained in the SEBI (Portfolio Managers) Rules and Regulations, 1993 and those issued from time. Once the fund manager reaches the maximum limit prescribed by SEBI, he is forced to invest in some other stock or some other sector. That is why we see a large number of stocks in a mutual fund portfolio. Where as a Portfolio Management Scheme will invest in 15 to 20 stocks. This concentration makes it more attractive and aggressive. Managing a 25 lakhs Portfolio Management Scheme portfolio will be more flexible when compared to managing a 2000 crores mutual fund portfolio. Portfolio Management Schemes relatively have more flexibility to move in and out of cash as and when required depending on the stock market outlook .Basically the conservative portion of your equity investment can go into mutual funds. The aggressive portion can go into Portfolio Management Scheme. Sebi plans to tighten rules for PMS providers as clients allege wrongdoings in the absence of consistent practices in the way they operate. In August 2009, the securities market regulator banned mutual funds from charging entry load, a fee that they charge investors to pay distributors. The aggressive exposure of PMS products to small- and mid-cap shares, which have dipped sharper than their large-cap peers in recent months, is another factor that weighed down returns. The focus on these shares enables them to perform better than the benchmarks in a bull market, but this strategy does not work in a weak market. "The portfolios of most of the PMS providers are concentrated around mid- and small-cap shares which may not be suitable for a large segment of clients. So, unless these categories don't perform, clients end up having a negative view on them as they still compare them to a Sensex or Nifty," said Kehair. So far in 2011, BSE's small-cap index has fallen 10.5%; mid-cap index has dipped 6%. The Sensex has declined 4.2%. Due to a weak market, investors have also shifted money from equity products, including the ones run by PMS operators, to fixed income products.

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Portfolio Management Scheme

Portfolio management scheme popularly known as PMS are specialized investment vehicle for lump sum investments. The portfolio manager invests the money in shares and other securities and manages the portfolio on behalf of the client. One can invest fresh money in Portfolio Management Scheme and the portfolio manager will construct a portfolio by deploying that money. Also one can transfer his existing share portfolio to the Portfolio Management Scheme provider. In that case, the portfolio manager will revamp the portfolio in sync with his investment philosophy and strategy. Once the Portfolio Management Scheme account is opened, the client will be given with a web access to his portfolio. The client can look at where the portfolio manager is investing clients money. Also one will be able to generate reports like Investment Portfolio Management Scheme Vs Direct Stock Market investment One can directly invest in stock market. Then what is the advantage of investing in the stock market through a Portfolio Management Scheme. Investing in share market demands knowledge, right mindset, time, and continuous monitoring. It is difficult for an individual investor to meet all these demands. But a Portfolio Management Scheme meets these demands easily. The Portfolio Management Scheme will be managed by an experienced professional. It saves the time and effort of the individual investors. Hence it is advisable to outsource the stock market investment to a sound Portfolio Management Scheme operator instead of managing it on our own. Portfolio Management Scheme VS Mutual Funds Mutual fund is also a good investment vehicle . It should also form part of your total equity investment. But mutual funds are mass products. So they will be conservative by nature. As per SEBI regulation, mutual funds have some investment restrictions. There is a maximum limit on the percentage of amount invested in an individual stock. Also there is some maximum cap on the exposure in a particular sector.

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Minimum Investment in Portfolio Management Schemes Hiked

MUMBAI: With a view to keep retail investors away from the portfolio management schemes(PMS), Sebi on Friday raised the minimum investment amount of clients for such schemes to Rs 25 lakh from Rs 5 lakh. PMS offers investors a range of specialised investment strategies to capitalise on opportunities in the market and made suitable to the needs of individual clients. "PMS regulations are light touch regulation and Sebi was worried that retail investors are being drawn into it whereas their interest are not as tightly protected or guarded as it is in mutual fund regulation," Sebi chairman U K Sinha had said after a board meeting last month. "With the amendments, Sebi has tried to synchronise the PMS rules with actual reality of the present time. Such schemes are basically from HNIs and big investors and the Rs 5 lakh ceiling was set long back in 1993 and no longer holds good," SMC Global Securities strategist and head of research Jagannadham Thunuguntla said. I was told that returns will be high because of better (equity) research. But, the value of my investments has fallen," said Jajodia. "So, I felt there is no point in continuing." Jajodia is among the scores of rich investors, who have cashed out of similar equity PMS products in recent months, irked by the inability of the operators to deliver on their promises of higher than-average returns. Assets under management of 239 portfolio managers have dipped 13% so far in 2011 to Rs 16,800 crore as on May 31, according to Sebi data. "Performance of portfolio management schemes is the key problem that has led to outflow of money from these products in recent months," said Ashish Kehair, headwealth management, ICICI Securities. Returns of PMS products are not available in public domain, as rules don't require them to do so. While PMS operators blame comatose stock markets for this underperformance and say this is an industry trend, higher fee is a bigger reason for the lagging returns. "Equities as an asset class has under-delivered in the past one year or so and that is reflecting in the performances of PMS and equity mutual funds. But, the underperformance of PMS has been more glaring after deducting the fees and profit sharing component most players charge," said Om Ahuja, head-wealth management, Emkay Global Financial Services. PMS providers charge clients 6-8% as fees that also include a share of profits. In comparison, investors in equity MF schemes pay 2.25% fee to AMCs.

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Building an Effective Loan Portfolio Management

As the leaders of each System institution, members of the board face the unique challenge of overseeing and directing the affairs of that institution. Although the board is charged with many responsibilities, loan portfolio management (LPM) is one responsibility critical to the success of the institution. However, portfolio management does not have be a perplexing puzzle to the lending institution or its directors. Rather, the board is urged to view it as the simple, but dynamic, process of managing the institutions primary earning assets (i.e., loans) to achieve the objectives established in the boards strategic business and capital plans. LPM encompasses all systems and processes used by the board and management to adequately plan, direct, control, and monitor the institutions lending operations. The principal components of an effective LPM system include strategic portfolio planning, lending policies and procedures, loan underwriting standards, a reliable risk identification program, clearly defined limits for portfolio concentrations, and an internal credit and collateral review. While not all inclusive, these components should be incorporated in the institutions portfolio management system and lending operations. Portfolio management is a continuous process that must include analysis of how business results were achieved, whether such results will continue, and how the institution can maximize its opportunities and provide the greatest benefits to its members. Because of the inherent risksin lending and the Systems statutory limitations on lending authorities each institution must effectively manage the loan portfolio. While an effective LPM system must incorporate and maintain many diverse elements and components, the scope and coverage of the system may vary based on the size, organizational structure, and complexity of the institution and its loan portfolio. Inevery institution, the LPM system must ensure that all material aspects of lending operations are adequately controlled relative to the institutions risk-bearing capacity.An institutions board should recognize that loan underwriting standards are a critical component of effective portfolio management. Loan underwriting standards form the critical link between the institutions strategic portfolio objectives and the individual loans in its portfolio. While the safety and soundness of the institution is ultimately determined by its portfolio management system, loan underwriting standards become the foundation that supports thequality, composition, size, and profitability of the portfolio.

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Understanding Portfolio Lending

Simply defined, a portfolio lender is a bank or other lending institution that makes mortgage loans with the intention of holding the loans in their investment portfolios. Portfolio lenders can often offer consumers greater flexibility in the loan granting process, as well as down the road, than lenders who make mortgage loans with the intention of selling them - either immediately or at some time during the term. However, portfolio lenders are not garbage cans. They do not accept every loan request and in today's market many portfolio loan programs are actually much more difficult to get approved for than Today, portfolio lenders are more likely to be smaller community banks-often privately held-that have more discretion in the way they do business than larger, stockholder-driven institutions. These banks can make lending decisions based on the intangibles as well as the tangibles of a transaction. For example, a long term banking relationship with a customer might influence a positive loan decision, even in a situation where there had been a period of poor credit. Such a situation would more likely draw a no from a non-portfolio lender, even if it were explainable. To more fully understand the portfolio lending concept and its implications for consumers, it is first useful to understand the alternative to portfolio lending-the selling of mortgage loans. One might ask: How can a bank sell a mortgage? Why would a bank make a mortgage loan, only to sell it? Who would buy mortgages, and why? Mortgages are considered business investments. For true portfolio lenders, mortgages are also investments in customers and in the communities served, allowing for growth and helping to maintain a healthy social and business environment. In mortgages, as in other investments, there are anticipated returns on investment (the interest paid over the life of the loan) and degrees of risk (the possibility that the interest and/or the principal will not be repaid.)

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The Emergence of Loan Portfolio Management

Loan portfolio management is an emerging technology solution that provides analytics, modeling and optimization ideally (though not yet) across lending instruments (mortgage, HELOC, syndicated loan). Loan portfolio management leverages not only borrower attributes, but also macro-economic factors such as real estate attributes by geography, unemployment data, projected interest rates and other factors. Loan portfolio management executes analyses at both the portfolio and individual customer from origination through servicing, including: New loan application risk: the risk of default for loan mortgage applications Prepayment risk: individual loan-level propensity for prepayment risk and exposure estimates Pricing analytics: value-based pricing for new loans and securities that includes risk factors such as default risk, interest rate exposure and prepayment risk Portfolio stress testing: analysis of loan portfolio and securities as macroeconomic parameters change Fraud modeling: predictive modeling to identify fraud Optimization: mathematical formulas and science-based decision modeling applied against each individual loan to determine its most-appropriate value in the face of uncertain conditions and risk factors Behavior modeling: adaptive recovery rate modeling (to predict the success of a loan modification) that changes over time as market conditions fluctuate (similar to predicting the risk of prepayment) Customer service support: real-time decisioning and workout support integrated with collection systems. End-users of loan portfolio management solutions include banks and servicers, distressed asset investors, mortgage insurers, broker dealers, money managers, and insurance firms.

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Loan Portfolio Management Overview

Lending is the principal business activity for most commercial banks. The loan portfolio is typically the largest asset and the predominate source of revenue. As such, it is one of the greatest sources of risk to a banks safety and soundness. Whether due to lax credit standards, poor portfolio risk management, or weakness in the economy, loan portfolio problems have historically been the major cause of bank losses and failures. Effective management of the loan portfolio and the credit function is fundamental to a banks safety and soundness. Loan portfolio management (LPM) is the process by which risks that are inherent in the credit process are managed and controlled. Because review of the LPM process is so important, it is a primary supervisory activity. Assessing LPM involves evaluating the steps bank management takes to identify and control risk throughout the credit process. The assessment focuses on what management does to identify issues before they become problems. This booklet, written for the benefit of both examiners and bankers, discusses the elements of an effective LPM process. It emphasizes that the identification and management of risk among groups of loans may be at least as important as the risk inherent in individual loans. For decades, good loan portfolio managers have concentrated most of their effort on prudently approving loans and carefully monitoring loan performance. Although these activities continue to be mainstays of loan portfolio management, analysis of past credit problems, such as those associated with oil and gas lending, agricultural lending, and commercial real estate lending in the 1980s, has made it clear that portfolio managers should do more. Traditional practices rely too much on trailing indicators of credit quality such as delinquency, nonaccrual, and risk rating trends. Banks have found that these indicators do not provide sufficient lead time for corrective action when there is a systemic increase in risk. Effective loan portfolio management begins with oversight of the risk in individual loans. Prudent risk selection is vital to maintaining favorable loan quality. Therefore, the historical emphasis on controlling the quality of individual loan approvals and managing the performance of loans continues to be essential. But better technology and information systems have opened the door to better management methods. A portfolio manager can now obtain early indications of increasing risk by taking a more comprehensive view of the loan portfolio.

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To manage their portfolios, bankers must understand not only the risk posed by each credit but also how the risks of individual loans and portfolios are interrelated. These interrelationships can multiply risk many times beyond what it would be if the risks were not related. Until recently, few banks used modern portfolio management concepts to control credit risk. Now, many banks view the loan portfolio in its segments and as a whole and consider the relationships among portfolio segments as well as among loans. These practices provide management with a more complete picture of the banks credit risk profile and with more tools to analyze and control the risk. In 1997, the OCCs Advisory Letter 97-3 encouraged banks to view risk management in terms of the entire loan portfolio. This letter identified nine elements that should be part of a loan portfolio management process. These elements complement such other fundamental credit risk management principles as sound underwriting, comprehensive financial analysis, adequate appraisal techniques and loan documentation practices, and sound internal controls. The nine elements are: Assessment of the credit culture, Portfolio objectives and risk tolerance limits, Management information systems, Portfolio segmentation and risk diversification objectives, Analysis of loans originated by other lenders, Aggregate policy and underwriting exception systems, Stress testing portfolios, Independent and effective control functions, Analysis of portfolio risk/reward trade Managing Loan Portfolios Lending is the principal business activity for most credit institutions. The loan portfolio is typically the largest asset and the predominate source of revenue. As such, it is one of the greatest sources of risk to an organisations safety and soundness The lifeblood of each lending institution is its loan portfolio and the success of the institution, depending on how well that portfolio is managed Loan Portfolio A loan portfolio is the cash amount of loans outstanding at any time, that is, money that has been advanced but not yet repaid. A loan portfolio does not include: Amounts already paid Loans approved but not disbursed Loans being processed Loans written off Loans fully repaid

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Systems influencing a Loan Portfolio It is important to distinguish among three systems that influence a financial institutions loan portfolio. The accounting system and loan tracking management information system (MIS) produce information. The loan administration system consists of policies and procedures that govern loan operations. These systems will now be explained. Accounting system: Receives information about individual loan transactions, but its purpose is to generate aggregate information that feeds into financial statements. Loan Tracking MIS: Is focused on information about individual loans, including: Identity of the client Amount disbursed Loan terms, such as interest rate, fee, maturity, and so on Repayment schedule amounts and timing Amount and timing of payments received Amount and ageing of delinquency Outstanding balance.

Ideally the loan tracking MIS should contain this information not only for current loans, but for past loans as well. The main purpose of the loan tracking MIS is to provide information relevant to the administration of the portfolio, regardless of whether this information feeds into the financial statements. Some information captured by the loan tracking MIS are:

Client identity Payment schedules Delinquency information Disbursements Payments Accrued interest.

The Loan Administration System: The Loan Administration System, like Compuscans Proloan system, is not an information system, but rather the policies,

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procedures, written or unwritten, that govern the financial institutions loan operations and this includes: Loan marketing Client and loan evaluation Loan size and terms Loan approval Handling of disbursements and payments by loan officers and cashiers Recording of disbursements and payments in the back room Client supervision Collection policies for delinquent loans Rescheduling of delinquent loans Internal controls.

Important ideas of portfolio A portfolio contains many investment vehicles. Owning a portfolio involves making choices that is, deciding what additional stocks, bonds, or other financial instruments to buy when to buy; what and when to sell; and so forth. Making such decisions is a form of management. The management of a portfolio is goal driven. For an investment portfolio, the specific goal is to increase the value. Managing a portfolio involves inherent risks.

Application portfolio management These refer to the practice of managing an entire group or major subset of software applications within a portfolio. Organizations regard these applications as investments because they require development cost & incur continuing maintenance cost. Also organizations must constantly make financial decisions about new and exiting software application, whether to invest in modifying them.

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The Steps in Portfolio Management

The first step of loan portfolio management is to analyse the loan portfolio. To do this, you need to review the portfolio report and use ratios to measure quality and collection rates of the portfolio. The second step is to identify loans at risk. Risk is associated with delinquency, arrears and default. If you have analysed the portfolio correctly, you should be able to see where loan (and even whole portfolios) are at risk. Having identified portfolios at risk, the third step is to take action to fix loans at risk. There is no point in analysing a portfolio, and identifying the loans at risk, if you have no intention of doing something about them. Factors impacting Loan Portfolio Management A financial institution must have systems and processes in place that result in adequate planning, directing and controlling of lending operations. These systems and processes comprise loan portfolio management and are discussed in this section. Strategic Planning: Sound strategic planning is a critical component of loan portfolio management and provides the framework from which management direct and control lending operations Strategic planning is important because it defines the goals and objectives of the loan portfolio and gives management the opportunity to anticipate conditions in the institutions operating environment and react accordingly. Mission Statement: Mission statements should provide some insight as to the type of credit provider the institution intends to be. Mission statements should also provide some insight into the boards philosophy on generating profits from lending operations. Due to the broad and fundamental nature of mission statements, examiners need to review lending goals and objectives in the business plan and lending policies to gain further perspective into the companys credit philosophy and approach to conducting lending operations.

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 Analysis of Internal and External Factors: This analysis should specifically consider the factors that may impact the institutions loan portfolio .An analysis should be completed in order to identify the risks in the loan portfolio, the threats to the loan portfolio, and the opportunities that the institution may want to consider for enhanced profitability or growth. Once these are identified, the analysis should determine the impact of those factors on the loan portfolio so that appropriate goals, objectives, and strategies can be established.

Goals, Objectives and Strategies: Once the institutions analysis of its operating environment is complete, goals and objectives for the loan portfolio should be established. Management should also establish strategies that are designed to accomplish their loan portfolio goals and objectives and to proactively position the loan portfolio to manage threats and maximise opportunities . Quality: Goals and objectives should be directed at the desired level of credit risk in the portfolio This level of risk should be determined through the institutions review of internal and external factors, with particular emphasis on the institutions capital adequacy, profitability, and overall risk-bearing capacity. Strategies that can be employed to achieve goals and objectives in this area include: Modifying loan underwriting standards to allow more or less risk or to require compensating strengths when certain credit factor weaknesses exist; Establishing credit administration standards, i.e., use of loan servicing plans and loan covenants; Modifying terms of credit extended, such as loan amortisation requirements; Adjusting interest rates based on loan characteristics; And modifying capital and risk funds positions.

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 Composition: Goals and objectives should focus on the desired portfolio mix and level of diversification to limit concentrations of credit relative to the institutions permanent capital or risk funds. Commodity or product concentrations within a loan portfolio exist when a group of similar borrowers have the same sources of repayment, collateral, economic, or geographic characteristics that would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions.

Profitability: Management should establish goals and objectives that address the desired profitability of the loan portfolio. These goals and objectives should be based on the level of risk in the loan portfolio, costs of operations, capital needs, and competitive position of the institution. Strategies that can be employed to achieve goals and objectives in this area include modifying loan pricing policies and procedures, identifying and monitoring profitability on a loan-by-loan and portfolio sector basis, or adjusting the interest rate spread or method of interest collection on loans.

Growth and Market Share: Goals and objectives that address growth and market share are necessary for institutions to survive in the constantly changing and competitive financial services industry. The opportunities for growth or increased market share should be identified through the institutions review of internal and external factors. The external review should include an analysis of key demographic data and trends to determine the existing and potential markets. Also, changes in legislation, regulations, technology, interest rates, and competition should be closely monitored as they often create opportunities for growth or market share. Strengths within the institution, such as experience and tenure of opportunities for taking on additional growth or solidifying market share.

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 Lending Policies and Procedures: Lending policies and procedures are key elements of loan portfolio management. Lending policies and procedures provide valuable direction and control over lending operations and should exist for each lending program authorised by the management of the organisation. Also, policies and procedures should specifically address the institutions analysis and documentation of loans and loan servicing requirements. Risk Parameters: Risk parameters communicate to management what the board considers an acceptable range of risk exposure. The establishment of risk parameters should be a dynamic process that flows out of the business planning effort and the review of internal and external factors affecting the institution. Therefore, the establishment of risk parameters should be tailored to the unique lending environment of each institution. Risk Identification: Properly identifying risk in the loan portfolio is critical to the overall effectiveness of loan portfolio management. The examination of an institutions risk identification process should primarily focus on managements ability to identify aggregate risks in the loan portfolio. Aggregate risks that should be identified include: Criticised and adversely classified assets; Past due loans; Non accrual loans; Restructured loans; Other property owned; Concentrations of credit; Dependence upon a single or a few customers; Loans that do not comply with underwriting criteria; Lack of borrowers current and complete financial data; Other credit administration deficiencies; and Loans with common credit factor weaknesses. Learning Activity

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Benefits Of Program And Portfolio Management

Portfolio helps in describing strengths, weaknesses, opportunities and other trade-off whereas; in program management, various organizational resources are collected and geared to accomplish the major tasks or goals of the company. Investment is the driving force for any organization, while the presences of other resources are desired for using that force. In order to effectively invest in the different parts of the organization, be it R&D, product development or something else, portfolio management is required. Portfolio Management helps the enterprises to figure out the assets which are consistent in their functionality according to the goals and perspectives of the investor as well as under its risk tolerance. Some benefits of program management are: It keeps activities focused on business change objectives by providing a framework to the senior management. Provides better risk management speculation because of the availability of wider context and knowledge of business goals. Helps in achieving consistent organizational system by integrating planning, delivery, assurance etc. with new policies, standards and work practices. More elaborate business operations are provided. This gives a more detailed view on improving performance and desired benefits by linking with new practices. More efficient co-ordination is observed among the teams and with various departments and more control is practiced by defining the roles and responsibilities of different individuals in the team. Portfolio management is about doing right projects which saves and builds the reputation of a company by a supported business strategy and brings success. Some benefits of portfolio management are: Efficient portfolio management strategy helps in identifying the scarce resources and focuses them on a particular task for efficient and effective outcome. It helps in object-based selection of projects, so that a company does not select a project which it didn't have the resource to develop. Trying to develop a project out-ofthe-scope of the company brings down the credibility of the organization. It makes projects more susceptible to risk and failure and provides with in-control failure rates and risk tolerance strategies

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Plenty of benefits for Discretionary Portfolio Management

In the aftermath of 2008-09, many investors have opted for discretionary portfolio management services. According to the Investor Economics Spring 2011 report, advisermanaged programs experienced growth of 9.2 per cent for the quarter and 30.5 per cent year-over-year with assets increasing from $40.1 to $52.4 billion as of March 2011. With discretionary accounts, time-pressed investors delegate day-to-day investment decisions to their portfolio manager (PM). That differs from non-discretionary accounts where clients must make final trading decisions. In a fast-paced financial world, delegation makes a difference. Consider an adviser with a hundred clients in non-discretionary accounts, each holding a particular stock. Should the markets take a turn for the worse or the company post unfavourable results, the adviser must contact each of those clients for approval to sell the position This can be a serious disadvantage when a situation warrants immediate action. Think about Sino-Forest Corporation. The company dropped from $18.05 to $4.81 in two days following an extremely negative research report. For clients in discretionary accounts, the PM can act on available information quickly and efficiently, selling the position out of all their accounts in a single, cost-effective transaction. Likewise, the PM is better positioned to seize buying opportunities. When the markets dip and a good quality stock inexplicably drops in value, the PM can again act without delay. Discretionary management can be particularly useful for profit-taking. Many investors find it easy to buy positions, but difficult to sell when the time is right to pull the trigger. A good PM takes emotion out of the equation by making the decision for the client. The PM doesn't invest without restriction, but is bound by the parameters outlined in a jointly developed investment policy statement. Discretionary accounts are very cost-effective, as most come with fewer fees than mutual funds. Fees are usually based on assets under administration, which motivates the PM to perform well because their fee is linked to portfolio performance. Fees are generally tax deductible in non-registered accounts. Discretionary accounts usually have higher minimum investment requirements, often starting at $250,000. When choosing a PM, investors should seek distinctions, such as access to high quality research and freedom from any influence toward proprietary products. The PM should have a clear communications plan and be readily available to answer clients' questions.

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Phases of Portfolio Management

Security Analysis Portfolio Analysis Portfolio Selection Portfolio Revision Portfolio Evaluation

Security Analysis (a) Fundamental analysis: This analysis concentrates on the fundamental factors affecting the company such as EPS (Earning per share) of the company, the dividend payout ratio, competition faced by the company, market share, quality of management etc. (b) Technical analysis: The past movement in the prices of shares is studied to identify trends and patterns and then tries to predict the future price movement. Current market price is compared with the future predicted price to determine the mispricing. Technical analysis concentrates on price movements and ignores the fundamentals of the shares. (c) Efficient market hypothesis: This is comparatively more recent approach. This approach holds that market prices instantaneously and fully reflect all relevant available information. It means that the market prices will always be equal to the intrinsic value. Portfolio Analysis A portfolio is a group of securities held together as investment. It is an attempt to spread the risk allover. The return & risk of each portfolio has to be calculated mathematically and expressed quantitatively. Portfolio analysis phase of portfolio management consists of identifying the range of possible portfolios that can be constituted from a given set of securities and calculating their risk for further analysis. Portfolio Selection The goal of portfolio construction is to generate a portfolio that provides the highest returns at a given level of risk. Harry Markowitzh portfolio theory provides both the conceptual framework and the analytical tools for determining the optimal portfolio in a disciplined and objective way. Portfolio Revision The investor/portfolio manager has to constantly monitor the portfolio to ensure that it continues to be optimal. As the economy and financial markets are highly volatile dynamic changes take place almost daily. As time passes securities which were once attractive may cease to be so. New securities with anticipation of high returns and low risk may emerge.

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 Portfolio Evaluation Portfolio evaluation is the process, which is concerned with assessing the performance of the portfolio over a selected period of time in terms of return & risk. The evaluation provides the necessary feedback for better designing of portfolio the next time around.

Benefits of Portfolio Management When implemented properly and conducted on a regular basis, Portfolio Management is a high impact, high value activity. Maximizes the return on your product innovation investments Maintains your competitive position Achieves efficient and effective allocation of scarce resources Forges a link between project selection and business strategy Achieves focus Communicates priorities Achieves balance Enables objective project selection Portfolio Loans When Freddie Mac and Fannie Mae announced their new lending rules last August, I started telling everyone who would listen that they need to start using portfolio loans to finance their investments. That generated hundreds of questions from investors who want to know more about portfolio loans and some seem to be a little confused. So, lets break it down. A portfolio loan is just a loan that is made by a lender that does NOT get sold into the secondary market i.e. Fannie Mae and Freddie Mac. These lenders are typically small banks and credit unions. Because they dont sell the loan off to Freddie or Fannie, they dont have to follow any of the stupid new rules such as a maximum number of 4 financed properties and no unseasoned cash out. There are portfolio lenders out there that allow an unlimited number of financed properties and unseasoned cash out. I spoke with an investor a few days ago who has 7 financed properties with Wells Fargo and he was certain they are a portfolio lender because he sends his payment to them every month. He was surprised that they refused to refinance any of the loans because of the max 4 financed property rule. Well, Wells Fargo is NOT a portfolio lender. They are a conventional lender. They sell their residential loans to Freddie Mac which means they have to follow the Freddie rules (bad). They have retained the servicing rights which is why the payment still goes to them every month but make no mistake, they will not do anything cool. So, what kind of loans do portfolio lenders make? Lots, but the ones we are concerned with are LLC loans, blanket loans and master loan commitments. Lets look at each one individually. 56

LLC Loans Portfolio lenders will originate and close a loan in the name of your LLC. That means it doesnt report to your personal credit report. The LLC does not have to be two years old and does not have to have any assets or cash flow. You are still personally guaranteeing the loan, it just wont show up on your personal credit which means if you want to get a Fannie or Freddie loan you can. The credit report is what tells the conventional lenders underwriter how many properties you have financed so if you have 25 LLC loans but none are on your personal credit, then the underwriter at Wells will write ZERO in the box that asks for the number of financed properties you have. Blanket loan A blanket loan means one loan that wraps many individual loans into one loan. If you have 25 LLC loans, you make 25 checks out each month, pay 25 tax bills and pay 25 insurance bills. Plus you have 25 different rates. And if they are adjustable rates, good luck trying to keep up with when they need to be refinanced. A blanket loan will take all 25 of those loans to make one big loan requiring one payment each month at one rate. This is a cool strategy for people that are buying or refinancing in bulk since its one loan that goes through underwriting; not 25. One thing to watch out for on these loans is the release policy which is what happens when you want to sell or refinance one property that is in the blanket. Some lenders will allow it with a fee, some wont allow it at all and will call the whole blanket loan due and others will require a substitution of collateral. That means youll have to put another property of equal or greater value in the blanket to take the place of the property youre taking out. Master Loan Commitments Once you establish a good relationship with a portfolio lender, you can take your business to a whole new level with a master loan commitment. Lets say you are a rehabber that likes to keep properties long-term as rentals. You buy them with hard or private money, fix them up and then you refinance them. If you are using conventional lenders, you can only have three rentals TOTAL because that maximum 4 financed properties rule includes your primary residence. Well, you can negotiate a deal with the portfolio lender where they agree to refinance all your FUTURE deals up to $1, $2, $3 even $5 million dollars over a 12 month period. That way youll never have to worry about where the refinance will come from or IF it will actually go through.

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CONCLUSION

In this we have selectively reviewed the dealing with the analytical issues arising from portfolio management On the other hand, this conclusion would still invalidate a good part of the portfolio management of banking related which is based on the idea that principals can extract a surplus from the agency relationship. As a principal-agent relationship between an investor (the principal) and a portfolio manager (the agent). We have argued that, while this peculiar form of agency relationship shares many features with a traditional principal-agent model, it also presents its own challenges. The fact that in a portfolio management setting the agent controls eort and can inuence risk makes it more dicult for the principal to write incentive compatible contracts which are optimal from her standpoint. In particular, we have shown how the fact that the portfolio manager can control the scale of his response to the information signals in a linear way More generally, gaining a better understanding of the general equilibrium implications of the agency aspects of portfolio management should be a paramount objective in future research. This is, in particular, a topic which should be interesting and relevant for policymakers, given the importance of delegated portfolio management relationships in all developed nancial markets. Note the possible impact of portfolio management on the emergence of asset price an excessive trading in capital markets is an issued

BIBLIOGRAPHY

BOOK NAME: VIPUL PRAKSHAN AUTHOR NAME: P.K. BANDGAR

WIBLIOGRAPHY

http//: portfolio.loan.com http//:portfolio.com.types